D.R. Horton, Inc. (DHI): A Bull Case Theory 

We came across a bullish thesis on D.R. Horton, Inc. on Value investing subreddit by HaywardUCuddleme. In this article, we will summarize the bulls’ thesis on DHI. D.R. Horton, Inc.’s share was trading at $158.46 as of December 2nd. DHI’s trailing and forward P/E were 13.60 and 13.85 respectively according to Yahoo Finance.

D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States and currently trades at $145 per share, significantly below the base‑case valuation of $254, implying roughly 60% upside and an expected IRR of 11.7% over the next 12–18 months. The market is treating Horton as a late‑cycle, low‑margin homebuilder, discounting its growth to 2.4%, net margin to 8.5%, and ROE to 10.2%. In contrast, the expected 3.5% revenue growth, 12.5% net margins, and 15% ROE, creates a clear mispricing opportunity.

Growth is supported by Horton’s controlled lot supply through its majority‑owned Forestar unit, broad national footprint, and backlog conversion, which should drive volumes above market expectations as cycle times normalize and affordability improves. Margins are also resilient, with low‑20s gross margins, tight overheads, and integrated mortgage, title, and closing services that reduce leakage, supporting an 11.5% near‑term net margin and a 12.5% steady state as incentives normalize. Return on equity benefits from scale, Forestar-backed lot turns, and ongoing share buybacks, yielding a sustainable 15% ROE.

Peer multiples—roughly 9.5x earnings, 1.3x sales, and 1.7x book—also suggest Horton is undervalued, with implied prices in the $210–$240 range, consistent with my DCF of $254 and intrinsic range of $231–$277. Key catalysts include Q4 FY2025, Q1 FY2026, and Q2 FY2026 results that could demonstrate healthy net orders, stable gross margins, SG&A discipline, and ongoing buybacks, supporting a re‑rating toward intrinsic value.

Downside risks include persistently high mortgage rates, ongoing incentives, or Forestar lot supply constraints, which could compress growth, margins, and ROE, bringing fair value closer to $141–$162. Conservative assumptions, including $1.0bn in unfunded liabilities, further underpin the investment case. Overall, the combination of mispricing, operational resilience, and visible catalysts makes D.R. Horton a compelling opportunity.

Previously we covered a bullish thesis on D.R. Horton, Inc. (DHI) by Let it Compound in May 2025, which highlighted the company’s national footprint, controlled lot supply through Forestar, strong returns, and disciplined capital approach. The company’s stock price has appreciated approximately by 26.01% since our coverage. HaywardUCuddleme shares a similar thesis but emphasizes a mispricing opportunity, projecting higher net margins, ROE, and upside from peer multiple re‑rating.

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Disclosure: None.